Archive for March 26, 2014

5 Steps Appraisers us in the Sales Comparison- Part 1 of 6

Part 1 of 6 – Appraisal Techniques for Real estate Brokers

Real Estate ValuesWelcome to the first of a six -part blog series which shows how residential appraisers value real estate using comparable sales.  I will take the methods we use and break them down into simple terms using real life examples.


Who should be reading this series? This information might benefit anyone interested in home values but I am writing it for you the real estate agent located in Eastern MA with MLS-PIN access, and with two specific needs in mind;

  • a real estate agent doing a CMA to get a potential home value for a listing appointment;
  • a real estate agent with a pending sale who is meeting the real estate appraiser.

In both cases being knowledgeable and learning to apply the techniques will give you certain advantages that can help you to be more successful and effective at serving your clients.


This series might also benefit you if you have ever;

  • Bought or refinanced a home and want an understanding as to how the sales comparison portion of your appraisal works;
  • Checked your home’s assessed value;
  • searched for a Zestimate or any other of automated “free home value estimator”.


The 5 steps in the Sales Comparison approach are as follows

1)      Study the market then select sales and listings most comparable to the subject (the residence being appraised).

2)      Collect and verifydata for each property e.g.; listing and sale prices and dates, physical and locational characteristics plus any special relevant conditions.

3)      Analyze and compare each comp with the subject. Consider the time of the sale, location, physical characteristics and conditions of the sale.

4)      Adjust the sales price of each comp up or down for any key differences that impact value and/or marketability.  Adjustments are derived from the market using matched pairs, regression analysis and other techniques (hang in there this will be to be demystified in part 5).

5)      Reconcile the “adjusted sales price” of the comps into one indicated value for the subject.


If you are a real estate agent with a pending sale who is meeting a real estate appraiser, how important is it to for you to know the steps appraisers use?  I always “comp out” my subject property but I respect and am interested in the broker’s opinion.  My usual experience is that the broker provides “comps” are unusable for reasons that will become clear.  you will be able to provide good quality comparables for use in your appraiser package.


If you are a real estate agent doing a CMA for a listing appointment, how important is it for you to close the appointment and leave with listing in hand?  You will be able to not only determine and support the correct listing value for your presentation, but will also be able to cut a competitor’s CMA comps to shreds.


This 6 part series will be as follows:

1)      This Introduction – Appraisal Techniques for Real estate Brokers

2)      Selecting Comparables- Finding an initial value range. How to select truly comparable properties.  MLS filtering and research tips, tricks and techniques. The importance of bracketing. Forget price per square foot, why you just have to let this truly awful and misleading indicator go (don’t tell your competition why).

3)      Data Verification- GIGO Time saving research methods and shortcut.  the most valuable free websites.  reading and understanding assessor’s field cards.  What to do after discovering non-comps because they failed verification (hint- toss them).

4)      Sales Comparisons- Not all differences are valuable in your market.  what are the key characteristics that impact value?  Understanding the cost vs. the market value of improvements. How to explain this to your clients.

5)      Comparable Adjustments- Matched pairs, sequential percentage adjustment, lump sum dollar adjustments, regression analysis, depreciated cost of new.

6)      Reconciliation of Comps- Why you never simply average the comps, and how to do a weighted average.


Do not worry if these terms are unfamiliar or seem math-scary.  appraisers have our own lexicon just like any profession.  The purpose of this series is to demystify and simplify what is going on under the hood of a sales comparison approach to value.  And to provide a simple method you can use for your CMAs and appraiser meetings.


See you on Monday 3/31/14 for Part 2 – Selecting Comparable


Tags, Real estate appraisal, sales comparison analysis, estimating home values, what is my home worth, real estate appraiser

Real Estate AppraiserI am seeking your requests for possible future topics, and if you have a real estate or appraisal related problem or question email me at

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The 7 Most Common Issues and Errors with Real Estate Appraisals

The Art of Deciphering Appraisal Reports

I conduct appraisal review assignments for attorneys, accountants, banks, lenders, appraisal management companies and other clients as part of my appraisal practice.

There are two types of real estate appraisal reports which I review; FNMA or lender reports and market value or non-lender reports.  For this article I will focus on the 7 most common issues and errors with market value appraisals.  All errors are violation of the requirements set forth in an ever-changing  set of quality control standards called the Uniform Standards of Professional Appraisal Practice (USPAP) to which all appraisers are bound.

The 7 Most Common Issues and Errors with Market Value Real Estate Appraisals

  1. Using the wrong appraisal form
  2. Missing highest and best use analysis
  3. Excluding an approach to value with no explanation
  4. No reconciliation between various value approaches
  5. Lacking time adjustments
  6. Incorrect date of value
  7. Factual errors


Using the wrong appraisal form

Sometimes I see forms that were designed by FNMA for use with federally insured loans being used for divorce, probate, pre-listing, tax or other non-lending appraisals.  So how does this cause a problem? These lending forms have pre-printed scopes of work, certifications and intended uses and intended users that are not appropriate for non-lender assignments. 


Missing highest and best use analysis

Highest and best use is always that use which would produce the highest value for a property, regardless of its actual current use. It is necessary for the appraiser to develop an opinion of the properties highest and best use and then to report a summary of the analysis within the appraisal report.

No reconciliation between various value approaches

There are three approaches to value;  the cost approach, the income approach and the sales comparison approach.  When an appraiser uses more than one approach usually they won’t lead to exactly the same value.  So how does an appraiser arrive at one final opinion of value?  the process is called the reconciliation between value approaches.


Excluding an approach to value with no explanation

An appraiser does not have to develop all three of the approaches to value as long as the resulting conclusion is not compromised and can be relied upon for its intended use. However, the appraiser is required to explain why any of the three approaches  was excluded.


Lacking time adjustments

When the real estate market has increased (or decreased) since the time a comparable was sold a date of sale adjustment will help to bring the old comp up to date with the current market.  The lack of an adjustment in this case is likely to affect the final valuation.


Incorrect date of value

Each appraisal has an effective date of value. It can be current, retroactive (past) or prospective (future).  I primarily see this error with tax abatement appraisals.  When homes are assessed for 2014 taxes the values were based on the fair market value of the home as of January 1st 2013.  In that case the appraiser must complete a retrospective appraisal using only sales that closed before January 1st 2013, the effective date of value.


Factual Errors

Most appraisals tend to rely on the sales comparison approach to value. This means that fact checking comparable sales is perhaps the most important parts of the appraisal process.  The MLS data is entered by individual brokers and not policed by MLS or anybody else.  As a result it is full of errors.  As the saying  goes “garbage in, garbage out” meaning that  the use of inaccurate data will lead an appraiser to arrive at an inaccurate valuation.


If you have any questions or think your firm would benefit from a presentation on any appraisal issues please feel free to contact me.  If you found this article helpful or informative, I would be grateful if you would like and share it with others.

And please let me know if there is any real estate or appraisal related topics that you are interested in.

Adam Wiener, CRA

Adam Wiener


Tags: real estate appraiser, real estate appraisal, appraisal errors, appraisal issues



HOMESTEAD- Protect your Home

Friends of mine recently refinanced their house and the attorney pointed out that there was a change in Mass law to protect homeowners.  It raised the amount that you can protect significantly, but you must file with the county to get the protection.  The link below explains the law.

Under the amended Homestead Act, up to $125,000 of a homeowner’s equity is automatically protected by law.  A homeowner can protect up to $500,000 in equity by filing a Declaration of Homestead with the Registry of Deeds.


If you found this article helpful or informative, I would be grateful if you would like and share it with others. And please let me know if there is any real estate or appraisal related topics that you are interested in. –

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